Emeco sells contracting business to Macmahon

Emeco will walk away from underground contract mining after selling its Pit N Portal business to rival Macmahon, in a deal allowing it to focus on underground equipment rental. 

Macmahon will essentially pay for Pit N Portal through the transfer of $10.1 million worth of surface and underground mining equipment to Emeco, with the latter party retaining all of its underground mobile mining equipment. 

The deal for Pit N Portal’s customer contracts, employees and non-mining fleet assets represents a backflip for Emeco, which purchased Pit N Portal for $72 million worth of cash and scrip in 2020. 

Macmahon said it expected the deal to add more than $140 million to its order book and 260 skilled employees to its roster. 

A five-year strategic rental agreement, through which Emeco will become Macmahon’s preferred rental provider for surface and underground equipment, has also been struck. 

Through the deal, Emeco will offer mutually agreed, competitive commercial rates and other partnership benefits to Macmahon.

“By supporting Macmahon and our other contracting customers, rather than directly competing with them, we can continue to grow our rental business, supported by our Force workshops,” Emeco chief executive and managing director Ian Testrow said. 

Mr Testrow said the overall strategy was to simplify the company’s project book. 

“By retaining our underground mining fleet, we can concentrate on our core capabilities of asset management, equipment rebuilds and providing customers with surface and underground rental solutions, whilst preserving exposure to the growing underground mining sector and providing a sustainable growth platform in hard rock commodities,” he said. 

The deal for Pit N Portal is expected to be completed early in 2024, subject to conditions. 

Emeco expects the transaction to have little impact on its FY24 operating earnings before interest, tax, depreciation and amortisation, but is forecasting one-off costs of around $2.8 million before tax. 

A pre-tax non-cash impairment of $16 million is also forecast on existing underground assets, as a result of a shift to a rental model. 

The deal was announced after market close on Tuesday.